What I’m Watching This Week – 14 January 2019

For the third straight week, stocks posted positive returns by the close of last week. Each of the indexes listed here gained at least 2.40%, with the small caps of the Russell 2000 zooming up by almost 5.0%. Energy shares had a strong week as oil prices rallied. Investors were also encouraged by rhetoric from Federal Reserve chairman Jerome Powell, who advised that the economy remained on solid ground and that the Fed would be sensitive to changes in the economy when determining whether to raise interest rates.

Oil prices climbed last week, closing at $51.67 per barrel by late Friday, up from the prior week’s closing price of $48.26 per barrel. The price of gold (COMEX) increased last week, closing at $1,288.50 by last Friday evening, up from the prior week’s price of $1,286.70. The national average retail regular gasoline price was $2.237 per gallon on January 7, 2019, $0.029 lower than the prior week’s price and $0.285 less than a year ago.

Market/Index

2018 Close

Prior Week

As of 1/11

Weekly Change

YTD Change

DJIA

23327.46

23433.16

23995.95

2.40%

2.87%

Nasdaq

6635.28

6738.86

6971.48

3.45%

5.07%

S&P 500

2506.85

2531.94

2596.26

2.54%

3.57%

Russell 2000

1348.56

1380.75

1447.38

4.83%

7.33%

Global Dow

2736.74

2772.41

2847.60

2.71%

4.05%

Fed. Funds target rate

2.25%-2.50%

2.25%-2.50%

2.25%-2.50%

0 bps

0 bps

10-year Treasuries

2.68%

2.66%

2.69%

3 bps

1 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic Headlines

Consumer prices fell slightly in December, dropping 0.1%, after being unchanged in November. Over the last 12 months ended in December, the index has increased 1.9% — the first time the 12-month change has been under 2.0% since August 2017. Driving the December decrease was a 7.5% decline in the gasoline index. The index less food and energy increased 0.2% in December, the same increase as in October and November. Over the last 12 months, prices excluding food and energy have risen 2.2%.

Though a bit dated, the latest figures from the Job Openings and Labor Turnover Summary revealed that the number of job openings fell to 6.9 million on the last business day of November. There were 7.1 million job openings in October. The number of hires fell from 5.9 million in October to 5.7 million in November. Total separations also fell from 5.6 million in October to 5.5 million in November. Over the 12 months ended in November, hires totaled 68.0 million and separations totaled 65.6 million, yielding a net employment gain of 2.4 million.

According to the December 2018 Non-Manufacturing ISM® Report On Business®, the services sector slowed last month. The non-manufacturing index dropped 3.1 percentage points lower in December from November. Business activity fell 5.3 percentage points, employment receded 2.1 percentage points, and prices plummeted 6.7 percentage points. New orders posted a marginal 0.2 percentage point uptick in December, while exports jumped 2.0 percentage points. Respondents remained concerned about tariffs and available employment resources.

For the week ended January 5, 2019, there were 216,000 new claims for unemployment insurance, a decrease of 17,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended December 29, 2018. The advance number of those receiving unemployment insurance benefits during the week ended December 29 was 1,722,000, a decrease of 28,000 from the prior week’s level, which was revised up by 10,000.

Eye on the Week Ahead

More reports relating to consumer prices and inflation are on tap for this week. The Federal Reserve’s report on industrial production and capacity utilization for December will be worth examining, particularly following purchasing managers’ indication last week that manufacturing is slowing.